Amreli Jilla Dudh Utpadak Sahakari Sangh Limited Vs DCIT/ACIT (ITAT Rajkot)
The Income Tax Appellate Tribunal (ITAT), Rajkot, allowed the assessee’s appeal against the order of the National Faceless Appeal Centre (NFAC) relating to Assessment Year 2018-19.
During assessment under Section 143(3) of the Income-tax Act, 1961, the Assessing Officer denied deduction under Section 80P(2)(d) in respect of certain receipts by treating them as income from other sources instead of business income. The Commissioner of Income-tax (Appeals) partly allowed the appeal but sustained the disallowance of ₹7,44,170, representing interest earned on fixed deposits, holding that such interest was assessable under the head “Income from Other Sources” and was therefore not eligible for deduction under Section 80P(2)(d).
The Tribunal first condoned a delay of 42 days in filing the appeal after being satisfied that sufficient cause had been shown.
The assessee, a registered co-operative society engaged in procuring milk from its members and supplying it to the Federal Co-operative Society, contended that the fixed deposits were not made as investments for earning interest. Instead, they were created at the insistence of the bank as collateral security for obtaining overdraft and other credit facilities required for its business. It submitted that the interest earned had a direct nexus with its business activities and therefore constituted business income eligible for deduction under Section 80P(2)(d). The assessee also relied upon the Tribunal’s decision in Moodbidri Co-operative Service Bank Ltd. v. Income Tax Officer and pointed out that in its own case, the Department had accepted similar claims in earlier and subsequent assessment years.
